October 08, 2010
When Congress left town to campaign for their jobs, they seemed to have left behind their sense of responsibility. At the end of this year, the 2001 tax cuts put in place by President Bush will expire. That means families across the board will be hit with increased taxes at a time of increased uncertainty about their futures. Instead of worrying about families making the hard decisions, Congress punted and made a gutless decision.
Our paid politicians are now campaigning full time, while the fate of the House and Senate still in the air. This means our Congressional leaders on the hill are weighing their options behind closed doors, and will not vote until after the election. When they do return, it will be as lame-ducks, meaning they don’t have to answer to anyone on how they will vote. There are three basic scenarios for the lame-duck session on taxes: a short-term compromise that extends all tax cuts; an extension for some taxpayers that allow just the top-income tax cuts to expire; and a less likely path where Congress waits for the new session to act. The third option ensures that all taxes will go up on Jan. 1, followed by a quick vote to renew all tax cuts if Republicans make major gains.
The result of increasing taxes will be felt across the country. Investment strategist and columnist Donald Luskin recently warned that if Congress fails to extend all of the 2001 tax cuts, the economy will slide back into a recession. "Do the math: 94 percent of income goes to consumption, and consumption is 70 percent of gross domestic product," he wrote in the Wall Street Journal. "All else being equal, if the Bush tax cuts don't get extended, that's a 2.3 percent hit to 2011 GDP. That means instant double-dip recession, starting at midnight, Dec. 31." That 2.3 percent hit to our GDP will directly affect the recovery businesses and unemployed Americans are counting on.
Clearly, in a time where businesses and families alike are not-optimistic about their futures, the time to act is now. This means extending the tax cuts for the next two years, and then extending them permanently. This will allow Congress to reign in the runaway spending, and put forth a common sense plan to pay off our debt. These days are not ones of niceties, but necessities. It is necessary now more than ever, to keep taxes low, pay down our debt, and end the deficit immediately if we wish to return to prosperity.